Incredible Shrinking GDP

The Commerce Department reported this morning that the U.S. Gross Domestic Product grew at an annualized rate of 1.6% during the second quarter, lower than the 2.4% initially projected a month ago and lower than the 3.7% reported for the first quarter. Take out the build in inventories, and you have real final sales growing at a meager 1%. The economy is clearly stalling. Most of the Q2 growth came in April, and it is likely that by the start of Q3 growth was flat to negative. How can we tell? Look here:

Banks continue to reduce their lending to businesses (above)...


...and instead are parking their money in U.S. Treasuries.
Risk OFF!

Jobs are disappearing once more...


MBA Purchase Index

reducing the demand for new home loans...


...and therefore sales of new homes (lowest since records began).
Fallout:
David Rosenberg of Gluskin Sheff expects another 3 to 4 million jobs to be lost in the construction industry.

The wild card in the debt pyramid? Looming sovereign defaults:

Spread between Greek and German 10-Year Bonds

Back to flash-crash highs; investors are nervous.